Tuesday, 28 October 2008

Robert Peston of the BBC blogs that a Bank of England report on the financial crisis tells how a similar banking credit crisis and contraction in Norway, Sweden and Japan lasted two to three years. Is that how long the recession will last? Or Perhaps even longer if there is a lag after lending and business investment and consumer spending start again? Incidentally, there are always lots of comments on his frequent posts and many of those comments add an interesting perspective. London is, or was(?) and major financial center so many insiders seem to want to get the dirt out and they comment away.

credit crunch - average two and a half years with about 20% decline in real credit

housing bust - average four and a half years with 30% decline in real prices

stock market crash - average two and a half years with 50% real decline in equities

Worse news, recessions associated with the above are much more severe, with economic output declining up to 1% and lasting over four years. As the authors say, "The main take-away of the past episodes is that some tough times are ahead for the global economy before matters get better." Their short article is based on a just-released 80 page study by the International Monetary Fund Systemic Banking Crises: a New Database by Luc Laeven and Fabian Valencia.